The Improvement Clause

A 1031 exchange is not something as simple as selling one property and buying another like-kind property. There’s much more to the provisions of this law that makes it quite easy for the informed investor to save on taxes. reports:

Improvement (build-to-suit or construction) exchanges allow an investor to use exchange proceeds to either (1) make improvements to an existing property or (2) build a new replacement property. This variation is extremely popular because it provides the opportunity to purchase properties needing renovation or to acquire bare land and build to an investor’s exact specifications.